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Social comparison and risk taking behavior

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  • Astrid Gamba
  • Elena Manzoni

Abstract

We study theoretically and experimentally decision making under uncertainty in a social environment. We introduce an interdependent preferences model that assumes that the decision maker evaluates monetary outcomes in relation both with his individual and his social reference point. In the experiment we reproduce a workplace environment whereby subjects interact in an e ffort task, earn (possibly) diff erent wages from this task and then undertake a risky decision that may give them an extra bonus. Controlling for intrinsic risk attitudes, we find that both downward and upward social comparison strongly influence risk attitudes and that they both generate more risk loving behavior. Moreover, we fi nd that a propension to envy counterposes such eff ect, by increasing risk aversion.

Suggested Citation

  • Astrid Gamba & Elena Manzoni, 2014. "Social comparison and risk taking behavior," Working Papers 266, University of Milano-Bicocca, Department of Economics, revised Jan 2014.
    • Handle: RePEc:mib:wpaper:266
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    Cited by:

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    2. Anastasios Koukoumelis & Maria Vittoria Levati & Chiara Nardi, 2021. "Social and Moral Distance in Risky Settings," Working Papers 13/2021, University of Verona, Department of Economics.
    3. Alexia Gaudeul, 2013. "Social preferences under uncertainty," Jena Economics Research Papers 2013-024, Friedrich-Schiller-University Jena.
    4. Fabio Sabatini & Francesco Sarracino, 2015. "Keeping up with the e-Joneses: Do online social networks raise social comparisons?," Papers 1507.08863, arXiv.org.
    5. Jingcheng Fu & Martin Sefton & Richard Upward, 2017. "Social comparisons in job search: experimental evidence," Discussion Papers 2017-10, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
    6. Schmidt, Ulrich & Neyse, Levent & Aleknonyte, Milda, 2019. "Income inequality and risk taking: the impact of social comparison information," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 87(3), pages 283-297.
    7. Celse, Jeremy & Karakostas, Alexandros & Zizzo, Daniel John, 2023. "Relative risk taking and social curiosity," Journal of Economic Behavior & Organization, Elsevier, vol. 210(C), pages 243-264.
    8. Filippin, Antonio & Gioia, Francesca, 2018. "Competition and subsequent risk-taking behaviour: Heterogeneity across gender and outcomes," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 75(C), pages 84-94.
    9. Stefan Grimm & Martin G. Kocher & Michal Krawczyk & Fabrice Lec, 2021. "Sharing or gambling? On risk attitudes in social contexts," Experimental Economics, Springer;Economic Science Association, vol. 24(4), pages 1075-1104, December.
    10. Sonnabend, Hendrik & Lackner, Mario, 2020. "Gender differences in overconfidence and decision making in high-stakes competitions: evidence from freediving contests," VfS Annual Conference 2020 (Virtual Conference): Gender Economics 224595, Verein für Socialpolitik / German Economic Association.
    11. Luca Congiu, 2023. "Framing Effects in the Elicitation of Risk Aversion: An Experimental Study," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 9(1), pages 321-352, March.
    12. Sean Fahle & Santiago I. Sautua, 2021. "How do risk attitudes affect pro-social behavior? Theory and experiment," Theory and Decision, Springer, vol. 91(1), pages 101-122, July.
    13. Fu, Jingcheng & Sefton, Martin & Upward, Richard, 2019. "Social comparisons in job search," Journal of Economic Behavior & Organization, Elsevier, vol. 168(C), pages 338-361.
    14. Müller, Stephan & Rau, Holger A., 2017. "Decisions under uncertainty in social contexts," University of Göttingen Working Papers in Economics 290, University of Goettingen, Department of Economics, revised 2017.
    15. He, Dan & Shen, Xi & Liu, Qing-Qi, 2020. "The relationship between upward social comparison on SNSs and excessive smartphone use: A moderated mediation analysis," Children and Youth Services Review, Elsevier, vol. 116(C).
    16. Michael Kirchler & Florian Lindner & Utz Weitzel, 2018. "Rankings and Risk‐Taking in the Finance Industry," Journal of Finance, American Finance Association, vol. 73(5), pages 2271-2302, October.
    17. Rau, Holger & Müller, Stephan, 2017. "Decisions under Uncertainty in Social Contexts," VfS Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168228, Verein für Socialpolitik / German Economic Association.
    18. Friedl, Andreas & Pondorfer, Andreas & Schmidt, Ulrich, 2020. "Gender differences in social risk taking," Journal of Economic Psychology, Elsevier, vol. 77(C).
    19. Alexandros Karakostas & Giles Morgan & Daniel John Zizzo, 2023. "Socially interdependent risk taking," Theory and Decision, Springer, vol. 95(3), pages 365-378, October.
    20. Dietmar Fehr & Yannick Reichlin, 2021. "Status, Control Beliefs, and Risk-Taking," CESifo Working Paper Series 9253, CESifo.
    21. Brañas-Garza, Pablo & Molis, Elena & Neyse, Levent, 2021. "Exposure to inequality may cause under-provision of public goods: Experimental evidence," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 92(C).
    22. Annika Lindskog & Peter Martinsson & Haileselassie Medhin, 2022. "Risk-taking and others," Journal of Risk and Uncertainty, Springer, vol. 64(3), pages 287-307, June.
    23. Müller, Stephan & Rau, Holger A., 2019. "Decisions under uncertainty in social contexts," Games and Economic Behavior, Elsevier, vol. 116(C), pages 73-95.
    24. Fabio Sabatini & Francesco Sarracino, 2015. "Keeping up with the e-Joneses: Do online social networks raise social comparisons?," Papers 1507.08863, arXiv.org.
    25. Philip Brookins & Jennifer Brown & Dmitry Ryvkin, 2016. "Peer Information and Risk-taking under Competitive and Non-competitive Pay Schemes," NBER Working Papers 22486, National Bureau of Economic Research, Inc.

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    More about this item

    Keywords

    Social comparison; risk aversion; interdependent preferences; reference point;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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